Short on Funds, Districts Declare Fiscal Emergency

By Christine Armario | June 3, 2009 | 12:45 PM EDT

Monticello, Fla. (AP) - These days, Superintendent Bill Brumfield finds himself frequently turning to passages in the brown leather Bible resting on his desk. His school district is losing students. Utility and transportation costs are rising. And he's expecting to lay off staff - even, perhaps, his own son.

"If he has to go, he has to go," the ashen-haired Brumfield said on a recent afternoon. "I can't hold back."

The rural Jefferson County School District in Florida's Panhandle declared a financial emergency in April, the second in the state since the recession began. Its reserves have dried up, and the district expects to have a deficit of $500,000 by the end of the fiscal year. In a state where many districts are grappling with sinking property values and budget cuts, Jefferson's situation is considered the most severe.

Districts that have declared fiscal crises in the last year range from those in smaller cities, such as Pocatello, Idaho, to one in a major metropolis such as Dallas. Typically it means the district is running a deficit and will struggle to finish the fiscal year. In these cases, the designation can be a precaution and give the school board authority to renegotiate contracts to reduce pay or eliminate staff. In others, the state declares the district in crisis after it falls out of financial compliance and requires intervention.

The designations are rare, even in a poor economy, said Mike Griffith, senior finance analyst with the Education Commission of the States in Denver.

"It's not just bad economy," Griffith said. "It's bad economy and the finance staff wasn't paying attention. Or finance staff was paying attention and leadership wasn't making the cuts they should have."

In a good economy, Griffith estimated that a half-dozen districts file for some form of financial emergency each year. In an economic downturn, that number rises to as many as two dozen of the more than 15,000 districts nationwide.

A variety of circumstances have led to crisis declarations: The Fort Worth, Texas, school district declared an emergency as a precaution in light of frozen revenue levels, rising expenses, and a $43 million deficit. In southeast Idaho, the Pocatello school board took the same step after the Legislature reduced funding to public education for the first time in the state's history.

"This is kind of uncharted territory for Idaho," said state Rep. Bob Nonini, who sponsored a bill that amended the financial emergency requirements, setting up a process for districts to renegotiate pay with employees. He said about eight districts in the state have declared an emergency, and he expects more to follow.

The National Education Association, a teacher's union, said it's concerned about districts targeting teacher salaries to balance their books.

"Declaring a state of emergency in order to reopen existing teacher contracts isn't the answer," Bill Raabe, director of collective bargaining and member advocacy, said in a written statement.

Federal stimulus funds are expected to provide some relief.

Jefferson County's finances were in peril long before Brumfield was elected last November. But few in this county of sprawling fields and not a single traffic light were aware of how dire things were.

The superintendent recalls when it sunk in.

"Son, y'all in trouble," Brumfield remembers Bill Montford, chief executive officer of the Florida Association of District School Superintendents, telling him at a meeting last winter. "You're broke."

Jefferson County has about 1,200 students, an annual budget of $8.9 million and just one elementary, middle and high school. They are all located in Monticello, a small town with historic homes, welcoming porches and green lawns. It's the kind of place where strangers wave hello to passing cars, family-owned restaurants and businesses still dominate downtown, and a watermelon festival takes place each year.

For years, the district's revenues climbed and spending increased. Administrators got Blackberrys. It bought a $12,000 pole vault pit it never used and paid more than $30,000 to provide maintenance staff and bus drivers with uniforms and laundry service.

From the outside, the district seemed to be doing fine. It constructed a new high school and increased teacher and principal salaries. But the general fund balance was rapidly dwindling.

School enrollment was declining, bringing the district a smaller share of state funding. A relaxed attitude toward spending prevailed, and officials missed other opportunities to generate revenue, leasing unused school buildings to the county and community organizations for $1 a year.

"The biggest problem is we didn't have a vision," said school board member Marianne Arbulu, who was elected last fall. "We didn't have a long range plan of where this district needed to go to be successful."

At the end of 2006, they had $1.4 million in reserve. Two years later, that figure was down to $175,548.

Not only were the district's finances in trouble, but its academics, too. The elementary school received two failing grades on the state's annual assessment within four years, and the high school has been given an 'F' three times since 2001. This has led parents to move their children out of the district. Since 2004-2005, enrollment has fallen 20 percent, even though the area's population has grown slightly over the last decade.

Brumfield wasn't fully aware of the district's fiscal troubles, but as a father and former teacher, wanted to help turn Jefferson's academics around. He ran for superintendent last fall, beating the incumbent in the primary and taking the general election.

Then he got down to business. He got rid of the Blackberrys and sold the pole vault pit. He cut back on office supplies.

"Nothing is thrown away," said LaClarence Mays, president of the elementary Parent Teacher Organization. Pencils are used longer and school books shared. A local church donated reams of paper.

Jefferson declared a financial emergency after its reserves dwindled to less than $30,000. The state appointed a committee to oversee its finances and is developing a fiscal recovery plan. The state is monitoring five other counties in danger of needing the same.

Brumfield expects Jefferson to cut about 10 of its 160 teachers and administrators. If he is forced to outsource custodians, his son could be out of work - an unlikely but possible scenario. He's also cutting softball and volleyball games, limiting travel and hiring fewer substitutes.

"We're just hanging in there, keeping the faith," he says.

These days, Superintendent Bill Brumfield finds himself frequently turning to passages in the brown leather Bible resting on his desk. His school district is losing students. Utility and transportation costs are rising. And he's expecting to lay off staff